CA. M. Lakshmanan

At first the Practising Chartered Accountants can be classified into two categories viz. ‘Subject to Service Tax’and ‘not Subject to Service Tax’, whether they are practising in their Individual capacity or in Partnership with others either as a Partnership Firm or as Limited Liability Partnership Firm (LLP). Whatever may be their status (Individual/Partnership Firm/LLP) if they do ‘interstate service’ they have register themselves compulsorily under the GST as provided in section 24(1) CGST Act irrespective of the fact that their Aggregate Turnover i.e. their gross receipts are being less than Rs. 20 Lakhs. As per section 7(3) of IGST Act Inter-State Supply means the services rendered in a state other than the home state and services rendered in home state for a Company situated in another state. As most of the CAs are doing Audit of Banks, whose Head Offices are generally situated in another state, they must register under GST and start collecting GST for all the services, though their gross receipts are less than Rs. 20 Lakhs. For those who were hitherto out of Service Tax Net, since their gross receipts were less than Rs. 10 Lakhs, they can start afresh and pay GST at applicable rate of 18% on raising the Bills. Many CAs., who were following cash system of accounting for Income Tax purposes,cannot follow cash system under GST, for which Mercantile System can only be followed.

The CAs who were already in Service Tax net are of two classes. Those CAs, whose gross receipts exceeded Rs. 50 Lakhs, are already paying Service Tax on due basis (mercantile system) i.e. on raising the bills, though in certain cases they may be following ‘Cash System’ for Income Tax purposes. They can continue to pay on same lines in the GST regime also.

For those CAs, whose gross receipts were between Rs. 10 Lakhs and Rs. 50 Lakhs and who were paying Service Tax on receipt basis, for the bills raised till 30.06.2017, they would be receiving payments from 01.07.2017, which would include Service Tax, which was charged @ 15% (including cess). But from 01.07.2017, they cannot account/collect Service Tax since GST has come into effect in lieu of Service Tax. In my opinion, for such receipts, they have to raise new bills with 18% GST in lieu of the old bills followed by receipt and pay accordingly to enable the person (registered under GST) who is paying, to claim credit for the payment he is making. Even if the party is an end customer who is not registered under GST, then he would be paying the Total Bill Amount, which would include the 15% ST and here also new bill is to be raised in lieu of old bill with 18% GST followed by receipt. In both situations, the extra burden of 3% is to be borne by the payer. A question may arise how a GST bill can be raised for services rendered before 01.07.2017. But there is no other option, because ST cannot be collected from 01.07.2017 and even if collected, neither it can be paid nor Service Tax Return can be filed because the last period for which Service Tax Return can be filed is for the three months ending 30.06.2017, which is already over.

In the transitional provisions, this issue is not addressed viz. ‘Procedure to be followed for those who were paying ST on receipt basis till 30.06.2017 for the collections made from 01.07.2017 for bills raised till 30.06.2017’.

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  1. GANESH S IYER says:


  2. N V N says:

    What is the position in case of concurrent audit of banks where the head office the bank is located in another state and fees is paid by the branch or regional office located in home state?..

  3. James Antony says:

    In this case, the bill is already accounted by the client and possibly CENVAT credit was also taken. In that case how can he account the same bill again and claim GST ? This will create issues in accounting as well as GST input

    1. CA. M. Lakshmanan says:

      If the bill prior to 01.07.2017 has been accounted by the client and credit has been taken and for which payment was made on or after 01.07.2017, procedure for accounting the receipt of ST in the hands of the CA is not accommodated in the transitional provisions. If accounted as ST, neither can it be paid nor return can be filed. It the same is to accounted as GST, rate varies (18% instead of 15%) and new invoice can not be raised , since old invoice was accounted already by the client and CENVAT credit has been taken as on 30.06.2017.

      1. Himanshu aggarwal says:

        Article is very nice and informative but your answer for this query is not clear.. can u please say it in clear words if client has taken credit of s.t. then how gst in revised bill will be treated by the client ?

  4. CA. M. Lakshmanan says:

    Once you get registered you have to collect GST from all the services including inter state service though the gross receipts are less than Rs. 20 Lakhs.

  5. Sridhar says:

    Whether it is necessary to make registration under GST,If practising Chartered Accountant gross receipts is less than 20 lakhs and he received appointment of branch audit from Regional/Zonal Office of the bank having office in the same state ?

    1. CA. M. Lakshmanan says:

      Though the appointment order is received from the R.O, Z.O. etc., which is situated in the home state the point to be considered is ‘For whom the audit is conducted ; normally statutory audits are conducted for reporting to H.O. only’. Hence in my opinion it is inter state supply only.

  6. CA Harikrishnan R says:

    The opinion that services of CA’s doing audit of Branches of Bank with Head offices in another state becomes inter state supply based on section 7(1) of IGST Act alone appears to be doubtful. As per sec2(14)(b) of IGST Act location of recipient means where a supply is received at a place other than a place of business for which registration has been obtained (a fixed establishment as defined under sec 2(7)),the location of such fixed establishment. I would like to get an opinion on this matter considering the above aspect also.

    1. CA. M. Lakshmanan says:

      Section 7(3) (wrongly stated as 7(1) in the article, which relates to Goods) reads as ‘Subject to the provisions of section 12, supply of services, where the location of
      the supplier and the place of supply are in––
      (a) two different States;
      (b) two different Union territories; or
      (c) a State and a Union territory
      shall be treated as a supply of services in the course of inter-State trade or commerce.
      Hence in my opinion it is inter-sate supply only.

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